Do Medical Bills Affect Your Credit? Here’s What You Need to Know

As a senior, you’ve likely experienced your fair share of medical expenses over the years. But did you know that those medical bills could be impacting your credit health without you even realizing it? According to a study by the Consumer Financial Protection Bureau (CFPB), over 43 million Americans have medical debt on their credit reports. This can lead to significant drops in credit scores.

Understanding how medical bills affect credit is crucial for maintaining your financial well-being. Unpaid medical bills that end up in collections can cause your credit score to plummet. This makes it more difficult to secure loans, mortgages, or even rental agreements.

We’ll dive deep into the relationship between medical bills and credit health. You’ll learn how medical debt can appear on your credit reports, the impact it can have on your scores, and the recent changes in credit reporting practices that may offer some relief.

Most importantly, we’ll provide actionable steps to help prevent medical bills from hurting your credit. You’ll also get guidance on addressing any existing medical debt on your reports.

How Medical Bills Can Affect Credit

Do medical bills affect your credit? Unpaid medical bills can harm your credit if they are sent to collections. This leads to medical collections on your credit report, potentially lowering your credit score. Fortunately, recent changes ensure that paid medical collections on credit reports no longer affect your credit. Unpaid bills also won’t appear for at least six months.

The Process of Medical Bills Appearing on Credit Reports

When a medical bill goes unpaid for an extended period, healthcare providers may turn the debt over to a collection agency. Once this happens, the collection agency can report the unpaid debt to the three major credit bureaus: Equifax, Experian, and TransUnion. This is how medical bills can end up on your credit reports, even if you were initially unaware of the debt or thought your insurance would cover it.

Not all medical providers report unpaid bills directly to the credit bureaus. However, once a bill is sent to collections, it becomes a separate account. The collection agency can then report it, potentially damaging your credit health.

Medical Debt Credit Impact

The presence of medical debt on your credit reports can significantly impact your credit scores. A single hospital collection account can cause a credit score to drop by up to 100 points. The impact depends on the individual’s starting credit score.

For example, someone with a credit score of 780 (considered “excellent”) could see their score drop to as low as 680 (considered “good”) due to a single medical collection account. This drop can make it harder to secure favorable loan terms, qualify for mortgages, or even rent an apartment.

Recent Changes in Credit Reporting Practices

In an effort to help consumers credit, the three major credit bureaus have recently implemented changes to how they report medical debt:

• As of July 1, 2022, paid medical collection debts are no longer included on credit reports.
• The waiting period before unpaid medical debt appears on credit reports increased from 6 months to one year, giving consumers more time to address the debt.
• Starting in 2023, medical debts under $500 will not be included on credit reports.

These changes aim to provide relief for consumers struggling with medical debt. They also help prevent unexpected medical bills from negatively impacting medical debt credit reports, which can cause long-term damage to credit health. However, staying proactive in managing medical expenses and addressing any unpaid bills is still crucial before they are sent to collections.

Steps to Prevent Medical Bills from Hurting Credit

Protecting your credit from the impact of medical bills requires proactive steps and careful management of healthcare expenses.

Review Every Medical Bill for Accuracy

Carefully reviewing every bill you receive is one of the most important steps to prevent damage to your credit. Errors in medical billing are common. Examples include duplicate charges, incorrect coding, and missing patient information. These mistakes can lead to overcharges or incorrect balances being sent to collections.

When you receive a medical bill, take the time to:

• Check for errors in charges or billing codes.
• Verify that the services listed match the care you received.
• Request an itemized bill to better understand the charges.

If you spot any errors or have questions about the charges, contact your healthcare provider’s billing department immediately to address the issue.

Communicate with Healthcare Providers and Insurance Companies

Maintaining open communication with your healthcare providers and insurance company is crucial. This helps manage medical expenses and prevents unexpected bills from impacting your credit.

Before receiving medical treatment, verify your insurance coverage and understand your financial responsibility. If you receive a bill you believe should be covered by insurance, contact your insurance company to discuss the matter. File an appeal if necessary.

If you can’t pay a medical bill in full, reach out to your healthcare provider proactively. Many providers will work with patients to set up payment plans or discuss financial assistance options. By communicating your situation early on, you can prevent the bill from being sent to collections.

Set Up Payment Plans When Unable to Pay in Full

The KFF Health Care Debt Survey shows that 41% of adults currently have medical debt. If you find yourself unable to pay a medical bill in full, setting up a payment plan can help prevent medical debt from appearing on your credit report. When arranging a payment plan, be sure to:

• Contact your healthcare provider’s billing department to discuss payment options.
• Negotiate a monthly payment that fits within your budget.
• Request the payment plan agreement in writing.
• Make payments consistently and on time.

By being proactive and working with your healthcare provider, you can avoid the negative impact of unpaid bills on your credit health.

How to Deal with Medical Bills on Credit Reports

If you encounter medical debt credit report issues, whether due to an error or an unpaid bill sent to collections, it’s essential to act. Here’s what you can do:

Dispute Inaccurate Information

If you believe a medical debt on your credit report is inaccurate, you have the right to dispute it with the credit bureaus. To do this:

• Contact the credit bureau(s) reporting the inaccurate information.
• File a dispute explaining why you believe the information is incorrect.
• Provide supporting documentation, such as proof of payment or insurance coverage.
• Notify your health insurance, healthcare provider, or collection agency of the dispute.

The credit bureau has 30 days to investigate your dispute. If the information is found inaccurate, it must be removed.

Provide Documentation to Support Disputes

When disputing medical debt on your credit reports, supporting documentation is key. Gather any relevant documents, such as:

• Proof of payment.
• Insurance explanation of benefits (EOB).
• Communication with healthcare providers or insurance companies.
• Billing statements or invoices.

Submit these documents to the credit bureaus and the collection agency to support your dispute.

Monitor Credit Reports for Updates

After filing a dispute, monitor your credit reports to ensure the inaccurate information is removed. You can request free credit reports from each of the three major credit bureaus once a year at Annual Credit Report.

For additional resources and support, visit these reporting agencies:

• The Consumer Financial Protection Bureau (CFPB)
• The National Foundation for Credit Counseling (NFCC)

If the disputed medical debt is removed, obtain confirmation in writing from the credit bureau for your records. If the debt remains on your report after the investigation, provide additional documentation or seek help from a credit counselor or attorney.

Take Control of Your Credit Health

Do medical bills affect your credit? Understanding how hospital bills affect credit and recognizing hospital bills’ affect on credit is crucial for maintaining financial well-being. By communicating with healthcare providers and insurance companies and regularly monitoring your credit reports, you can minimize the effects of medical debt on your credit health.

You can protect your credit health and secure a brighter financial future by staying informed about personal finance and taking proactive steps to manage your medical expenses.